Other ways of sourcing for financing your business

In my last post on ways of financing business which are personal savings, family and others

These are other ways of sourcing for Business finance

Equity investors

Equity investors are individuals with lots of money who provide capitals for business start-ups. They are interested in businesses with promising growth potential. You are required to share ownership and control of your company with the equity investors.

The extent to which they will demand ownership and control of the company depends on the amount of money they invested in your company. You need to be careful not to be pushed aside in your own company. This usually happens when the investor has sufficient money for your type of business and invested more than you did.

Venture Capitalist

Venture capitalists are group of wealthy individuals, government assisted sources or major financial institutions who have a dedicated pool of capital and makes it available for the expansion of businesses with great profit potential. They hardly invest in new businesses unless there is a significant profit potential which can be identified and measured. Sourcing fund from a venture capitalist is a good idea because you get money that does not have to be repaid. Banks may be more willing to extend credit to your business because the money invested by the venture capitalist is equity. It is good to note that the venture capitalist may demand control over your business.

Customers

This source of fund is only feasible if you have consistently built an excellent reputation in your field of business. Your customers can help finance or partially finance your business by making advance payment for goods. You can equally encourage cash payment instead of giving the customer goods on credit. You can also generate funds by granting cash discount to customers who make early payments.

Trade credit

By negotiating a deal with your suppliers, payment for raw materials or goods supplied may be deferred to a future date. This enables you to use the income generated from the sales of the goods manufactured to pay up your debt instead of borrowing to do so.

Grants

Grants are non-repayable funds bestowed by a government or a private non-profit organization/foundation (grantmakers) to an eligible recipient (grantee). Competition for grants is usually heavy but you can obtain grants if your enterprise will have a positive social impact, benefiting not just you but also the entire community.

Grants may not necessarily come in the form of money but may come in the form of fixed asset. For instance, the land where the business/factory will be located or equipment.